What Is Nonfiling?

Let’s face it, no one likes to think about filing a yearly or quarterly tax return. It can feel like such a burden and can also take up quite a bit of time. It is not, however, something that should be avoided or not done at all. Failure to file a tax return is also referred to as “nonfiling” and it can cause more trouble than going ahead and filing would have caused in the first place.

What Is Nonfiling?

Failure to file a tax return, or “nonfiling,” is a bad idea for a number of reasons. First of all, there are penalties associated with a delay in filing. If you file your return over 60 days past the due date, then you can face a maximum penalty of 25% of the unpaid tax bill. Furthermore, filing an extension on your return does not necessarily extend the due date for the tax payment itself. Paying your taxes late can lead to serious penalties. In fact, late payment penalties accrue at .05% of your unpaid taxes each month, all the way up to a 25% maximum. Should your failure to file be found fraudulent, filing your return late can be increased up to 75% of the unpaid tax.

If you do not file a tax return for yourself, the IRS may go ahead and prepare a tax return for you. Each year, third parties report income information to the IRS through forms such as W-2s and Form 1099. The IRS can use this information to prepare a tax return for you. This is not a good thing. You could easily miss out on critical exemptions, as well as deductions and credits to which you may be otherwise entitled.

While there is generally not a penalty for filing a refund late if you are entitled to a refund, there are other risks associated with this. For instance, late filing and nonfiling can lead to you losing your right to a refund. If you wait over three years past the tax return’s due date, you will likely lose your right to claim a refund you would have otherwise been entitled to.

In addition to monetary penalties associated with late filing, nonfiling can also be considered a crime at the state and federal levels. At the federal level, nonfiling can be classified as a misdemeanor or felony. Potential penalties include steep fines and even prison time. You may be fined $25,000 for each year of nonfiling. To be criminally prosecuted for nonfiling, however, the IRS carries the burden of establishing that your returns were not filed willfully or intentionally.

San Francisco Tax Attorneys

If you are facing potential penalties for nonfiling or late filing, Regal Tax & Law Group, P.C. is here to help. Our team of trusted tax attorneys is available to you to discuss your options. Contact us today.